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Revaluations and Capital Gains in the Context of Natural Resource Accounting


  • Michael Harris

    () (School of Economics, La Trobe University)


Tension exists between national accounting practice (in which capital gains are not counted as part of national income), and the theory of national income definition and interpretation (in which capital gains are often argued to be a component of national income). Much of this theoretical work arises in the context of research into natural resource accounting, where capital gains arise endogenously as natural assets are depleted. In this paper, the appropriate treatment of capital gains in a variety of circumstances is presented. I argue that views on the inclusion (or not) of capital gains are contingent on the underlying interpretation being applied to national income. Capital gains matter when income is interpreted in sustainability terms, rather than in its traditional guise as a measure of the value of output. Even when income is given a sustainability-related interpretation, different views on gains arise from different presumptions regarding the type of gain (the source of the asset price change). Further disagreements in the literature are shown to turn on the time perspective adopted by the individual analyst. The measurement of capital gains varies with the adoption of a present-value versus a current-value perspective. Using this insight, I resolve a number of conflicting claims in the literature. I also raise the neglected issue of revaluations arising from obsolescence, something hitherto neglected in the context of natural resource accounting.

Suggested Citation

  • Michael Harris, 2001. "Revaluations and Capital Gains in the Context of Natural Resource Accounting," Working Papers 2001.08, School of Economics, La Trobe University.
  • Handle: RePEc:trb:wpaper:2001.08

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    References listed on IDEAS

    1. Dan Usher, 1973. "The Measurement of Economic Growth," Working Papers 145, Queen's University, Department of Economics.
    2. Asheim, Geir B., 1996. "Capital gains and net national product in open economies," Journal of Public Economics, Elsevier, vol. 59(3), pages 419-434, March.
    3. Common, Mick & Sanyal, Kali, 1998. "Measuring the depreciation of Australia's non-renewable resources: a cautionary tale," Ecological Economics, Elsevier, vol. 26(1), pages 23-30, July.
    4. Asheim, Geir B, 1994. " Net National Product as an Indicator of Sustainability," Scandinavian Journal of Economics, Wiley Blackwell, vol. 96(2), pages 257-265.
    5. Vincent, Jeffrey R. & Panayotou, Theodore & Hartwick, John M., 1997. "Resource Depletion and Sustainability in Small Open Economies," Journal of Environmental Economics and Management, Elsevier, vol. 33(3), pages 274-286, July.
    6. T.K. Rymes., 1992. "Some Theoretical Problems in Accounting for Sustainnable Consumption," Carleton Economic Papers 92-02, Carleton University, Department of Economics, revised 1993.
    7. Kjell Arne Brekke, 1997. "Hicksian Income from Resource Extraction in an Open Economy," Land Economics, University of Wisconsin Press, vol. 73(4), pages 516-527.
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